The wave of optimism that took over the crypto market recently suffered a dampening blow. The U.S. Securities and Exchange Commission (SEC), in its unpredictable yet unsurprising style, is yet to green-light any spot Bitcoin ETFs.
With six applications hanging in limbo, one can’t help but question the Commission’s reservations.
A Game of Wait-and-See
While the crypto world buzzed with anticipation, the SEC decided to hit the snooze button, delaying its verdict on six major spot Bitcoin ETF applications.
Among the waiting applicants are the industry’s giants: WisdomTree, VanEck, Invesco Galaxy, Bitwise, Valkyrie, and the Wise Origin Bitcoin Trust presented by Fidelity.
The SEC has generously awarded itself another 45 days from the official Federal Register publication date to mull things over. This leaves the market biting its nails until October, waiting for a nod, a rejection, or yet another stalling tactic.
A potent mix of past and recent events had the crypto industry brimming with hope. Notably, the SEC’s recent court defeat against asset manager Grayscale signaled potential winds of change.
The court’s decision necessitated a review of Grayscale’s petition to morph its Bitcoin Trust into an ETF. This verdict had many speculating that the U.S. might finally join other nations in hosting its inaugural spot Bitcoin ETF.
WisdomTree’s past application for a Bitcoin ETF in 2021 had been left on read by the SEC. Yet, with market bigwig BlackRock now tossing its hat into the Bitcoin ETF ring, the former refiled its application.
Add to this the buzzing whispers in July about the SEC potentially warming up to ETF applications tied up with surveillance-sharing agreements. Several firms, with Coinbase tagged as a partner, were quick to refile their applications, optimistically aiming to ride this perceived wave of change.
The SEC’s storied pipeline boasts applications from various firms, with BlackRock and ARK Invest just being a few names in a crowded space.
Many had their eyes set on Bitwise’s BTC investment vehicle, expecting it to either get the go-ahead or face another delay, given its imminent deadline of September 1. And yet, here we are.
Following the deferral, Bitcoin’s price took a hit, dropping by 5%. The deflated price effectively erased the gains earned after a Washington court ruling earlier that week. This court ruling exposed the cracks in the SEC’s long-standing resistance to ETFs centered directly on Bitcoin.
Despite the pressing demand, the regulator’s reluctance stems from concerns over market manipulation. In an industry that constantly demands transparency, SEC Chair Gary Gensler’s remarks on the crypto market being “teeming with fraud” added fuel to the fire.
However, it’s not all gloom. A window of opportunity remains. The Washington court’s ruling forces the SEC to reassess its stance on Bitcoin ETFs. Mid-October stands as the potential D-day for these decisions.
But as Mark Palmer of Berenberg Capital Markets rightly points out, the inclusion of Coinbase in the ETF filings further muddies the water.
Their proposed surveillance-sharing agreements with regulated exchange giants like CBOE Global Markets and Nasdaq has ruffled a few feathers, considering the past legal tiffs with the regulator.
All said, the SEC’s continued hesitance is baffling to many. Their long-standing opposition, mainly based on market manipulation concerns, has been blatantly challenged. While they could unearth new reasons to halt these applications, their primary rationale has now been starkly refuted in court.
As Jeremy Senderowicz of Vedder Price aptly sums up, the SEC’s historical reservations about a sufficiently regulated market for cryptocurrency trade have been decidedly rebuffed.
One can only hope that this bold assertion makes the SEC rethink and recalibrate. The crypto market’s yearning for clarity, approval, and progression remains palpable. One thing’s certain: October promises to be a nail-biter.
